Report of the Audit Division on Biden for President, Inc....Biden for President, Inc. December 15,...

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Report of the Audit Division on Biden for President, Inc. December 15, 2006 - April 30, 2008 Why the Audit Was Done Federal law requires the Commission to audit every political committee established by a candidate who receives public funds for the primary campaign.' The audit determines whether the candidate was entitled to all of the matching funds received, whether the campaign used the matching funds in accordance with the law, whether the candidate is entitled to additional matching funds, an^y^^|^^ whether the campaign otherwise complied with tni limitations, p|6pj^i^s,,^and' disclosuj^lquiremibnt^p^^^ the election law. Futurel^|ion The Commissi6^nay initiate an enforceinint action, at a later tim^^^ respect to any of the discussed in this reporf About the Committe^(P^^ Biden for President, Inc. is the p.riheipal campaign committee of Joseph R. Biden, Jr., a candidate for the I^^^ratic Party's nomination for the office of President of the United State|f The>#|gnimittee is headquartered in Wilmington, DE. For mpre i^formatio^see chart on the Campaign Organization, p. 2. ^^^^ * '^lij^ Financial<i&§|t;iidt3i^^. 3) Receipts ^ o Contributions r^^mdividuals o ^;p^ontributionsfroniP^|tliticalCommittees ^^pngf^rsfromAffiir^l£)ommittees ^iSifeceived ^Sp^ ^ g j - u : - - r » :—ju^ Iatchin^Bunds!>Receive# 0ffs|ts t(^peratuij^Xpenditures OtheBg&eipts Total Receipts ^ Disbursements .p Operatin^Tcpenditures l^^bganjtepayments o Transfers to Other Authorized Committees ko Contribution Refunds ^^pi^'otal Disbursements Findings and Recommendations (p. 4) Net Outstanding Campaign Obligations (Finding 1) Receipt of Contributions that Exceed Limits (Finding 2) Prohibited In-Kind Contribution (Finding 3) Stale-Dated Checks (Finding 4) Disclosure of Disbursements (Finding 5) Reporting ofDebts and Obligations (Finding 6) $ 8,210,947 166,045 1,900,000 1,468,614 857,189 270,611 12,650 $ 12,886,056 $ 10,656,525 857,189 639,408^ 578,032 $ 12,731,154 ' 26 U.S.C. §9038(a). ^ These monies represent general election contributions subsequently redesignated to the candidate's senate committee.

Transcript of Report of the Audit Division on Biden for President, Inc....Biden for President, Inc. December 15,...

Page 1: Report of the Audit Division on Biden for President, Inc....Biden for President, Inc. December 15, 2006 - April 30, 2008 Why the Audit Was Done Federal law requires the Commission

Report of the Audit Division on Biden for President, Inc. December 15, 2006 - April 30, 2008

Why the Audit Was Done Federal law requires the Commission to audit every political committee established by a candidate who receives public funds for the primary campaign.' The audit determines whether the candidate was entitled to all of the matching funds received, whether the campaign used the matching funds in accordance with the law, whether the candidate is entitled to additional matching funds, an^y^^|^^ whether the campaign otherwise complied with tni limitations, p|6pj^i^s,,^and' disclosuj^lquiremibnt^p^^^ the election law.

Futurel^|ion The Commissi6^nay initiate an enforceinint action, at a later tim^^^ respect to any of the discussed in this reporf

About the Committe (P^^ Biden for President, Inc. is the p.riheipal campaign committee of Joseph R. Biden, Jr., a candidate for the I^^^ratic Party's nomination for the office of President of the United State|f The>#|gnimittee is headquartered in Wilmington, DE. For mpre i formatio see chart on the Campaign Organization, p. 2. ^ ^ ^ ^ * '^lij^

Financial<i&§|t;iidt3i^^. 3) • Receipts ^

o Contributions r^^mdividuals o ;p^ontributions froniP^|tlitical Committees

^^pngf^rs from Affiir^l£)ommittees ^iSifeceived ^ S p ^ ^ g j - u : - - r » : — j u ^ Iatchin^Bunds!>Receive# 0ffs|ts t(^peratuij^Xpenditures OtheBg&eipts Total Receipts

^ Disbursements .p Operatin^Tcpenditures

l^^bganjtepayments o Transfers to Other Authorized Committees

ko Contribution Refunds ^^pi^'otal Disbursements

Findings and Recommendations (p. 4) • Net Outstanding Campaign Obligations (Finding 1) • Receipt of Contributions that Exceed Limits (Finding 2) • Prohibited In-Kind Contribution (Finding 3) • Stale-Dated Checks (Finding 4) • Disclosure of Disbursements (Finding 5) • Reporting ofDebts and Obligations (Finding 6)

$ 8,210,947 166,045

1,900,000 1,468,614

857,189 270,611

12,650 $ 12,886,056

$ 10,656,525 857,189 639,408^ 578,032

$ 12,731,154

' 26 U.S.C. §9038(a). ^ These monies represent general election contributions subsequently redesignated to the candidate's senate committee.

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Report of the Audit Division on

Biden for President, Inc.

December 15, 2006 - A^ri l 30, 2008

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Table of Contents

Part I. Background Authority for Audit Scope of Audit Inventory of Campaign Records Changes to the Law

Part II. Overview of Campaign Campaign Organization Overview of Financial Activity

Part III. Summaries Findings and Recommendations

Page

Summary of Amounts Potentially Owed to the ci$i^easury

Part IV. Findings and R^l^mpendatiGrl^ Finding 1. Net Outstanding Campaiy^%^itipns ''^^'^''^ Finding 2. Receipt of Contributions i^ t Ex^p^^units , / Finding 3. ProhibitedTnr^ind Contrib^on^ Finding 4. Stale-D^^fe|^ks ^ Finding 5. Dis^J^^e of Di^ursements % Finding 6. Repoiti^^f D e ^ and Obligations"

6 9

15 17 19 20

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Part I Background Authority for Audit This report is based on an audit of Biden for President, Inc. (BFP), undertaken by the Audit Division of the Federal Election Commission (the Commission) as mandated by Section 9038(a) of Title 26 of the United States Code. That section states "After each matching payment period, the Commission shall conduct a thorough examination and audit ofthe qualified campaign expenses of every candidate and his authorized committees who recejs^^ [matching] payments under section 9037." Also, Section 9039(b) ofthe United States " ' ™ " ^ — of the Commission's Regulations state that the Commission mgyi audits from time to time as it deems necessary.

Scope of Audit This audit examined: 1. The receipt of excessive contributions and loans?e |j;' 2. The receipt of contributions from prohibited sourcei 3. The receipt of transfers from other authorized commil^pv

te and Section 9038.1(a)(2) duct other examinations and

4. The disclosure of contributions and t ^ | ^ s received. 5. The disclosure of disbursements, debts%hc^^Iipations. 6. The recordkeeping process and completenpsPo^^^

The consistency between reported figure^md bam 7. 8. The accuracy of the St^jem^t^gf Net Outsi^^fig Caniplign Obligations. 9. The campaign's conn^|iance^^|kspending limitations. 10. Other campaign opj^k^s nec6| ary to the r levy.-

^Y.>$ Gnaucts |jnventory''bf campaign records before it begins the audit fieldwo^^^FP records w|^^ateri^^y^omplete and the fieldwork began immediately.

Changt^il^e Lai^^ On September i4^jgp7, the Pi^lident signed into law the Honest Leadership and Open Government Act o f^^^ (HL^GA), which included many revisions to the ethics rules that govern the conduct or^p\,i«Senators and members ofthe House of Representatives. One of the effects of HLOGA was t^stablish new rules goveming presidential non-commercial travel after September 14, 2007. Se'ction 439(a)(c) of Title 2 ofthe United States Code was amended to prohibit Senate and Presidential candidates, and their authorized committees, from spending campaign funds for travel on non-commercial aircraft, unless they pay their pro-rata share of the charter rate. The Commission intends to amend its cunent regulations to implement the new law. However, in a press release dated September 24,2007, the Commission Chairman indicated that "until regulations are issued, the Commission would not pursue a political committee if it operates under a reasonable interpretation of the statute, even if our subsequent regulations reach a different interpretation." Since the travel noted in Finding 3, Prohibited In-Kind Contribution, occuned before September 14,2007, the new travel rules were not applicable.

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Part II Overview of Campaign

Campaign Organization Important Dates Biden for President, Inc.

Date of Registration January 31,2007 Eligibility Period December 3,2007 - Jan\j^3,2008 Audit Coverage December 15,2006 - J ^ i \ \ 30^2008

Headquarters Wilmington,

Bank Information Bank Depositories One Bank Accounts teking, origj certificate of deteit

Treasurer Treasurer When Audit Was Conducted Melvyn Monzay Treasurer During Period Covered by Audi& ' Melvyn Monzak

Management Information Attended FEC Campaign Finjsurice Seminar Used Commonly Availablil 6am^jgn Management Softwarg^ckage ^Hia

• Who Handled Accoanfiii^|RecordkdiBping Tasks and Other Day-to-D|l|ppe^Qns„

^ The period during which the candidate was eligible for matching fiinds began on the date of certification of his matching fund eligibility and ended on the date the candidate announced his withdrawal fix>m the campaign. See 11 CFR §9033. * Limited reviews of receipts and expenditures were performed after April 30,2008, to detennine whether the candidate was eligible to receive additional matching funds.

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Overview of Financial Activity (Audited Amounts)

Cash on hand ^ December 15,2006 $0 o Contributions from Individuals $ 8.210,947' o Contributions from Political Committees 166,045 o Transfers from Affiliated Committees 1,900,000 o Loans Received 1,468,614 o Matching Funds Received ,#1^,189'' o Offsets to Operating Expenditures M 270',611 o Other Receipts JS' ' ' s nij 12,650 Total Receipts m $ » | ( 6 , 0 5 6 o Operating Expenditures $10,g^25 o Loan Repayments ' 8 5 7 m . o Transfers to Other Authorized Committees A 639,408 ':j !!j| o Contribution Refunds ^ 578,032^ Total Disbursements $'12,731,154" Cash on hand @ April 30,2008 $ 154,902

' Approximately 33,000 contributions fi'om more than 20,000 individuals. ^ As of April 30,2008, BFP had made 5 matching fiind submissions totaling $2,016,725 of which $1,992,225 was certified by the Commission; however, BFP had only received $857,189. As of June 30,2009, BFP had submitted 9 requests totaling $2,070,557 of which $2,033,472 was certified and has been received, representing 10% of the maximum entitiement ($21,025,000). ^ These monies represent general election contributions subsequently redesignated to the candidate's senate committee.

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Part III Summaries

Findings and Recommendations

Finding 1. Net Outstanding Campaign Obligations The Audit staffs review of BFP's financial activity through September 30,2009, and estimated winding down costs indicated that the candidate did no| iej;eive matching fund payments in excess of his entitlement. (For more detail, see

Finding 2. Receipt of Contributions %at Elided Limits The Audit staffs review of contributions from indiv,i i4'a|[s1ndicatei iiM failed to resolve a material number of excessive contributjpl s. Based on a sam]^]^^ contributions, the projected dollar value of the^^^^^solved^xcessive contriShtigns in the population is $106,216. In its response to th^jjriiLifnJnary | u ^ BF^fated it would make a payment of $106,216 to the U.S. Tr^^^^^ner service of the'final audit report.

In addition, the projected amount of ex^esis:i| ^t>tributionslip|p^^^ not resolved in a timely manner is $1,092,899. In respon^kto mb^i^||inary a^Sit report recommendation, BFP provided several deljlaratrdn^oEriircontributors and staff to support that letters had..bge^en| to resolve%cessive colhfributions. No documentation supporting these dec||iiil[tions^^^tablishing^i^t the actions were timely was included. (For more detail, se&pM]

'Contribution The revpV&f camp' |i^>|rave'l^entified one flight by BFP on a private aircraft that was reinih^sgd using the l i ^ ^ t unrefi^c^d and non-discounted first-class commercial airfs^^^^^ever, the pll^^utilizediwas certified by the Federal Aviation Administration and opersS^in a manner f ^ requfred its use be paid at a charter rate. The difference between what^Ff paid anclithe charter rate resulted in the receipt of an in-kind contribution of ii S>,889 fmlli a corporation. In response to the preliminary audit report recommendation, iSi^i^mcated that it would make a payment to the U.S. Treasury after service of the final auoit report. (For more detail, see p. 15)

Finding 4. Stale-Dated Checks The Audit staff identified stale-dated checks totaling $137,757 issued by BFP. Subsequent to the exit conference, BFP made a payment to the U.S. Treasury for stale-dated checks in the amount of $8,457 resulting in an unresolved balance of $129,300. In response to the preliminary audit report recommendation, BFP provided documentation which resolved $43,400 in stale-dated checks, leaving $85,900 unresolved. BFP indicated that it would make a payment to the U.S. Treasury after service ofthe final audit report. (For more detail, see p. 17)

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Finding 5. Disclosure of Disbursements The Audit staff identified 49 disbursements, totaling $3,779,976, that were not adequately disclosed. Problems noted included incorrect or inadequate purpose as well as incorrect addresses. Subsequent to the exit conference, BFP filed amended reports that materially conected the disclosure of these disbursements. BFP's response to the preliminary audit report provided no additional comments relevant to this matter. (For more detail, see p. 19)

Finding 6. Reporting of Debts and Obligations The Audit staff identified debt totaling $870,296 that was noyiiscloseid on Schedules D (Debts and Obligations) as required. Subsequent to the exi|f!^^erence, BFP filed amended reports that materially conected the disclosure^lOfies^^e^ts. BFP's response to the preliminary audit report provided no additionay^mn fnents remp,nt to this matter. (For more detail, see p. 20)

Summary of Amounts Pot€i|^ally Owed to the U.S. Treasury

Finding 2 Receipt of Contt^jutibhs^matpxceed Limits % .4 "~

$ 106,216

Finding 3 Pg^%itgd In-Kind 1|, Wtribution' StaL^tejlfed Checks %

26,889 Finding 4

^ T ^ l l Due U.S. Tbasury 85,900

$ 219,005

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Part IV Findings and Recommendations

I Finding 1. Net Outstanding Campaign Obligations

Summary The Audit staffs review of BFP's financial activity through September 30,2009, and estimated winding down costs indicated that the candidate did i^^c^ive matching fund payments in excess of his entitlement.

Legal Standard A. Net Outstanding Campaign Obligations (NOC^g^Wjthin 15Til^||| after the candidate's date of ineligibility (see definition beli^), th^ candidate ni'^^t^bmit a statement of "net outstanding campaign obligati^." Thi&statement mus^ontain, among other things: "wsa. ,

The total of all committee assets including ^sop^hand, amounts owed to the committee and capital assets listed at their fairi^^et value;

• The total of all outstanding obii^||ipns for qualifiel^^paign expenses; and • An estimate of necessary windin|pll ^n%, osts. 11 C]^M9634.5(a).

B. Date of Ineligibility. The date of ineli^ibiH#is^|^^yer of the following dates occurs first: W

The day on jfiiSii the^nldidate ceases to be active in more than one state; The 30th d f^Howingllb second cori^^^tive primary in which the candidate receives less th^ra^e^^^^fthe populsTr vote; The^^i^^^ll^ m a l ^ ^ payiil]^]^|icrd, which is generally the day when the

^nbmiji^!B|y[ts csi^ldate for the general election; or Jn the case ofWilididate^^ose> party does not make its selection at a national

^G^vention, the l^f^ay o f l a s t national convention held by a major party in th^lllendar year. mCFRl§9032.6 and 9033.5.

C. Qualified i^|Si|jpaign pcpense. Each of the following expenses is a qualified campaign e x p e n s S ^ ^ ^

• An expense t ^ f is: o Incuned by or on behalf of the candidate (or his or her campaign) during the

period beginning on the day the individual becomes a candidate and continuing through the last day of the candidate's eligibility under 11 CFR §9033.5;

o Made in connection with the candidate's campaign for nomination; and o Not incuned or paid in violation of any federal law or the law of the state

where the expense was incuned or paid. 11 CFR §9032.9. • An expense incuned for the purpose of determining whether an individual should

become a candidate, if that individual subsequently becomes a candidate, regardless of when that expense is paid. 11 CFR §9034.4.

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• An expense associated with winding down the campaign and terminating political activity. 11 CFR §9034.4(a)(3).

D. Value of Capital Assets. The fair market value of capital assets is 60% of the total original cost of the assets when acquired, except that assets that are received after the date of ineligibility must be valued at their fair market value on the date received. A candidate may claim a lower fair market value for a capital asset by listing the asset on the NOCO statement separately and demonstrating, through documentation, the lower fair market value. 11 CFR §9034.5(c)(l).

E. Entitlement to Matching Payments after Date of Ineligibilii^h^, on the date of ineligibility (see above), a candidate has net outstanding canm^n obligations as defined under 11 CFR §9034.5, that candidate may continue to recd^m^tching payments provided that he or she still has net outstanding campaignMebts on^e day when the matching payments are made. 11 CFR §9034.1 (b). ' ^ ^ ^

Facts and Analysis M ^ The Candidate's date of ineligibility (DOI) v/as jMsLry 3, J | p . The AudiMaff reviewed BFP's financial activity through SeptemM^g|^^09^analyzed estimated winding down costs and prepared the. Statement of Net^^Mstanding Campaign Obligations that appears on the next pa^.

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Biden for President, Inc. Statement of Net Outstanding Campaign Obligations

Asof January 3,2008 Prepared September 30,2009

Assets

Primary Election Cash in Bank General Election Cash in Bank Accounts Receivable Capital Assets

Total Assets

Liabilities

Primary Election Accounts Payable General Election Accounts Payable Winding Down Costs:

Paid 1/4/08-9/30/09 Estimated Winding Down Costs (10/1/09%tl2/31/09)

Loan Payable at 1/3/08 Amounts Payable to U.S. Treasury for: '^i

Unresolved Excessive Contributions (See Finding 2) Prohibited In-Kind Contribution (See Finding ^ j l ^ ^ Stale-Dated Checks ( S e e j i i l ^ l ^

Total Liabilities

Net Outstandingp,ampaign'^¥Kgat!d¥i|^^ of January 3,2008

|a] ^yjusted for stale- ^^\checS&|mg $8,457 issued prior to DOI.

$ 403,900 1,213,933

173,184 f»^'»38.774

[a] [b]

^^m216^/^

00 219.005

$1,829,791

4.316.646

($2,486,855)

[b] Gra^n^election contribjations revived do not affect the NOCO or matching fiind entitlement. This asset is offset by equal miotunts in the li^lity section. General Election Accounts Payable $1,130,333 plus $83,600 of the amount listed as'B l to the U.S. Measury for Stale-Dated Checks.

[c] The Audit stafF^iljplview BFP's disclosure reports to compare actual figures with the estimates and prepare adjustments acco0ingly.

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Shown below are adjustments for funds received after January 3,2008, through September 30,2009, based on the most cunent financial information available at the close of fieldwork:

Net Outstanding Campaign Obligations (Deficit) as of 1/3/08 ($2,486,855) Private Contributions and Other Receipts Received 1/4/08 through 9/30/09

358,966

Matching Funds Received 1/4/08 through 9/30/09 2,033,472

Remaining Net Outstanding Campaign Obligations (Deficit) jfe

($94,417)' It.

As presented above, BFP has not received matching fund payritents in excess of its entitlement. I Preliminary Audit Report Recommendation mnd ComiA^^t^e Response ^ The Audit staff recommended that BFP demc^fi^atj^n adj||]tment(s) is reqliired to any component ofthe NOCO statement or provide any^^^^li^^^ents it so de^es. In response to the preliminary audit report recommendai[i@%BFP provided no adjustments or comments on the NOCO statement dfe the Audit staff c5Miusion.

I Finding 2. Receipt of ContnbuliSn^Qpx Exceed Limits |

\ Summary The Audit staffs r^vf^pf conMbutions from\kdividuals indicated that BFP failed to resolve a material numbi^i^i^^^ij^contrib^ Based on a sample of contribution$; :hefMFPiected@Mar vfiiil^^ unresolved excessive contributions in the

audit report, BFP stated it after service of the final audit

In addition, fhliprojected a£6unt of excessive contributions that were not resolved in a timely mannerl^ |yL)92, . In response to the preliminary audit report recommendation, ^l^pjovided several declarations from contributors and staff to support that letters hWbeen sent to resolve excessive contributions. No documentation supporting these declarations or establishing that the actions were timely was included.

Legal Standard A. Authorized Committee Limits. An authorized committee may not receive more than a total of $2,300 per election from any one person. 2 U.S.C. §441a(a)(l)(A), and (f); 11 CFR §§110.1(a) and (b) and 110.9.

' Subsequent to date of ineligibility, BFP incurred and repaid a $161,500 loan. This has no effect on the analysis and is not included in the above figures.

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B. Handling Contributions That Appear Excessive. If a committee receives a contribution that appears to be excessive, the committee must either:

• retum the questionable contribution to the donor; or • deposit the contribution into its federal account and keep enough money on

account to cover all potential refunds until the legality of the contribution is established. 11 CFR §103.3(b)(3) and (4).

The excessive portion may also be redesignated to another election or reattributed to another contributor as explained below.

1. Redesignation of Excessive Contributions. The committee jn^ a ) redesignate the excess portion of the contribution for use in am^^'^

ask the contributor to redesignate the excess portion of the contribution for use in ai St rii>election.

The committee must, within 60 days of receipt of th ,| ^ ibution, obtain and retain a signed redesignation letter which inform^ ji co'n butor that a refund of the excessive portion may be requested; or ' ^ }>. refiind tiie excessive amount. 11 CFR §§i;rf(fc^(5), 110.1(i)ilfeand 103.3(b)(3).

Notwithstanding the above, when an authorize^li^ptical committee receivls^n^xcessive contribution from an individual or a non-multi-cah^^|e^66im[mittee, the cominittee may presumptively redesignate the excessive portion to tHmeperal election ifthe contribution: W. '^^^^

• Is made befbre that candidate's i n^ election; ;s • Is not designated in writing fbr 2 % arfKteEge • Would be excessive if treated as a%ima r'el4 ;||Qn |ph'tribution; and • As redesignated oe,s.ppt cause the o ibutor'&exceed any other contribution

•limit. ^ ^ ^ " ^ ^ ^ •%. Also, the committee ma. presuii||tively redes%nate the excessive portion of a general election contribution Wgk 1[o thjll rimary electi^ifthe amount redesignated does not exceed the committee's pmiia lll'debtjipgs

The comHiittee is requi d to noti the contributor in writing ofthe redesignation within 60 d y l he treasurer lejpeipt oi h contribution and must offer the contributor the option to i jpive a refund ^ tead. jF or this action to be valid, the committee must retain copies of th^btices sent, ^ sumptive redesignations apply only within the same

)mmittee's primary and general elections. 11 CFR

W D. Reattribution of'Excessive Contributions. When an authorized committee receives an excessive contribution, the committee may ask the contributor if the contribution was intended to be a joint contribution from more than one person.

• The committee must, within 60 days of receipt of the contribution, obtain and retain a reattribution letter signed by all contributors; or

• refund the excessive contribution. 11 CFR §§110.1(k)(3), 110.1(1)(3) and 103.3(b)(3).

Notwithstanding the above, any excessive contribution that was made on a written instrument that is imprinted with the names of more than one individual may be attributed

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among the individuals listed unless instructed otherwise by the contributor(s). The committee must inform each contributor:

• how the contribution was attributed; and • the contributor may instead request a refund of the excessive amount. 11 CFR

§110.1(k)(3)(ii)(B).

For this action to be valid, the committee must retain copies of the notices sent. 11 CFR §110.1(l)(4)(ii).

E. General Election Contributions. If a candidate is not a candj^te in the general election, any contributions made for the general election shall ^j^efi^nded to the contributors, redesignated in accordance with 11 CFR §§1 ipjp^)(5) or 110.2(b)(5), or reattributed in accordance with 11 CFR §110.1(k)(3), as §102.9(e)(3).

F. Sampling. In conducting an audit of contribj #6ns, the CommissioB^uses generally accepted statistical sampling techniques to qu^i!^i||,the d o l ^ value of rel^^^tidit findings. Apparent violations (sample enors) iden^^e^ ini^ '^ple are use d to project the total amount of violations. If a committee demotii^^^s that any apparent sample errors are not enors, the Commission^jll make a new p^^ction based on the reduced number of enors in the sample. Withilffi^days of service^mhe final audit report, the committee must submit a check to the t ^ l e ^ ^ ^ s Treasurpf^he total amount of any excessive contributions not refunded, reat|ribu^p^^|i4esignated in a timely manner; or

ffrespi^iilample-based findings. 11 CFR § 9038.1(f). ™ take any action required by the Commissid^^

Facts and Analsrsim. ^ The Audit staffs sample reviewMiicQntributiorfs'Trom individuals indicated that BFP received a gfiifijblij^numb'e^ that either were unresolved or were noyisoTveH'll^^^ ^Nyner. The projected dollar value of the unresolved excessLmcontributioris^P|the sam]pli| pOpulation was $106,016 . An additional enor of $20dw^4pntified as th^^sult o il eparate review of contributions not included as pa part of the sanipli^^pulation. ^^mple'enors included:

Checl^^ttributiormssue - The errors were for contributions from single account holder cH^ks,. Si^.n contributions cannot be presumptively reattributed to another indiwllu'j^ Other Credit p&rd - Attribution Issue - The documentation provided in support of these contributions included credit card authorizations and, if available, solicitation response devices. The excessive portion of the contribution was reattributed to another individual without obtaining the signature of the second individual acknowledging both the contribution and joint liability for the credit card used to make the contribution.

' A Monetary Unit Sample was used with a 95% confidence level. The estimate is subject to a sampling error of $91,693 for unresolved excessive contributions. For untimely resolved excessive contributions the estimate is subject to a sampling error of $348,491.

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Other Credit Card - Designation Issue - The documentation provided in support of this contribution included a credit card authorization and a solicitation response device. The response device was not adequate to constitute a designation of the contribution to the general election and the excessive contribution was not refunded. Online Credit Card - Designation Issue - Some of the contributions were received through BFP's internet website. The website did not provide sufficient notice to the contributor to constitute an attribution of a portion of the contribution to another person or to designate a portion ofthe contribution to the general election. BFP's online contribution screen stated it could "accept ^ibutions from an individual totaling up to $2,300 per election." It did noj^lrthat an individual could contribute $2,300 to the primary election and M^^O to the general election or a total of $4,600 to both elections, and failed tQj |irovid ^ opportunity for the contributor to designate a contribution for eacKeflktion. Ifmdition, the online contribution screen did not provide an opportumty for the coh utor to attribute a contribution to another individual. Accoraingly, it was not discjl able whether a contributor intended to contribute parfi his or h ontribution tb hei eneral election or attribute that contribution to ani^|r iri^fd^al when tha cbntribution was made during the primary election period^^^

The Audit staff also identified excessi ontributions thai ki? resolved but not in a timely manner, totaling $1,092,899. Tni^poj^i^dollar valt ! f such excessive contributions in the sample population w%$l,0' ^^ .Addijtional enors totaling $37,500 were identified ^^ result of a separate rev ^ p 'contributions not included as part of the sample poppl lii ^ ll of these l|tessive cohtributions were presumptively designated for the g;e ral elecl,^; however, OTP did not provide copies of letters sent to contributors as nottfidaiiipn for tp election desi ation. However, BFP did provide the Audit staff with letters oi nini fdesigjnatioi|s^ general-designated contributions to the Candid^^^enate ^aignlli%#e. Citizens for Biden (CFB). The letters were alL§;1 d bi 'il iontriim^s and mailed after the Candidate's date of ineligibility (l-3-j^&vell after the ^ ipt ort| |,=contributions. Although these letters were not pre mptip[e redesignationf spec|iibd in the Commission's regulations, the Audit staff considerei se letters tol^an adequate, though untimely, substitute to support the "general elect^^^esigna^i of these contributions for BFP.

This conclusion is^^:§^^t with the notice provision of presumptive redesignations. A presumptive redesig tion does not require a written authorization from the contributor. Rather, BFP may send a notice to the contributor of the redesignation and inform the contributor of his or her option to request that the contribution be refunded. The Audit staff concluded that the signed forms authorizing the redesignation of Presidential contributions to the Senate election(s) also serve to put the contributor on notice that BFP had presumed that the portion ofthe otherwise excessive Presidential primary election contribution was redesignated to the Presidential general election. The contributions to the Presidential primary election, however, were excessive until the Presidential general to Senate redesignation forms were sent. Given that these redesignation forms, serving as the functional equivalent of the presumptive redesignation notices, were sent much later

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than 60 days after the excessive Presidential primary contributions, they are untimely as to the redesignations from the Presidential primary to the Presidential general election.

At the exit conference, the Audit staff provided BFP representatives with schedules of all the errors for both the unresolved excessive contributions and the untimely resolved excessive contributions. A discussion ensued regarding the adequacy of letters used to support redesignations of contributions to the general election.

On September 26,2008, BFP submitted its response to the matters presented at the exit conference. The response acknowledged that the untimely redesignation issue arises from BFP's inability to provide presumptive redesignation lettej l ough confident that such letters were timely sent, BFP staff was unable to loea the letters or evidence that they were sent and believe they were inadvertently lost/whe ^ location changed in the spring of 2008. BFP further explained the letter woi i have be: prepared using a template on a BFP computer that was subsequently wipid'' clean" ani oid when its assets were liquidated following the Candidate's ithdrawal from the presidential campaign.

BFP offered the following circumstantial evidence tOv j brt that tiie letters had in fact been sent: •

BFP submitted a complete librs|j C !cure'' letters |j ther for excessive contri to S QFmation. InM|:i!£ibn, its Contributic contributions or missing contrib^^ii^Fi^tion. In alp!£i6n, its Contribution

Review Procedures make referen6|; to pi^mgtive redesignation and/or reattribution letters and templates fi iainir lBe ignations and reattributions are provided, gpii ^^contained ot compliajFrce letters sent for problematic contribution. d thosSl uesting additional information. BFP noted that it is unlikely th#it^mild serif this array of^^pliance letters and omit presumptive

sending the compliance letters, including let fs to rei %iexcessp;& contributions, had specific recollection that

.|ip;esumptive rea |i|nation: pi dr reattribution letters had been sent. However, ' l individual is ^i^^ decekilfd; and, therefore, BFP is unable to obtain a signed affiiavjt. BFP sta^bnfirmed her recollections, and that she was meticulous and cons^pus in peirming her duties.

• BFP has %n contacting recipients of presumptive redesignation and/or reattributiofl l ' and although some do recollect receiving such a letter, none have been abl o furnish a copy. Should any be located, copies will be forwarded to the Audit staff. No such copies have been provided to the Audit staff.

• Finally, BFP concuned with the Audit staffs position that those letters sent to redesignate contributions to Citizens for Biden serve to demonstrate that BFP did not fail to resolve a material number of excessive contributions. According to BFP, these letters reflected an understanding by the contributor and BFP that the excessive portion had been properly resolved and expressed the donative intent of the contributor.

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The Audit staff did not believe that BFP's response was sufficient to document that presumptive redesignation and/or reattribution letters had been sent.

Preliminary Audit Report Recommendation The Audit staff recommended BFP provide:

• Documentation demonstrating that the unresolved excessive contributions ($106,216) were not excessive. Such documentation could have included copies of timely negotiated refund checks or timely signed and dated reatnibution/redesignation letters. Absent such documentation, the Audit staff recommended that BFP make appropriate refunds to |; ributors or make a payment of $106,216 to the U.S. Treasury and projgi l idence of such action (copies of the front and back of negotiated und checks). Should documentation be presented that demonstrated)^)r§S||gle exceptions were not excessive contributions, it was noted that th| Audil^'^[ would calculate a revised amount payable to the U.S. Treag^^^^is revise Wount or the unrefunded portion thereof, would bey^yable within 30 cale^oki; days of service of the final audit report; an^^^ %^

• Documentation demonstrating that exce|^^ c^ri^utions ($ 1 ,Opf ,899) were timely reattributed and/or redesignated. Sii||h;;|locumentation was to include evidence that timely presumi)tive reattributid^'j^i^redesignation letters were sent; copies of timely signei||t^^dated reattribution/redesignation letters; or, any other documentation whiish''iii|l^|j^ a timely%|ti^ribution and/or redesignation was obtained. m;P wsfs|i|^!pd to provide any other comments it felt were relei(,ant to this issu^^^^S^

Committee Re|j^nse tdipreliminar^Audit Report In its response to the preliminan|Lliudit report:

BFP provide^MA^^!lk4§!^uni!^^^io'i demonstrating that the unresolved ^3j§^^^contrib^^ns '(^W^^ were not excessive. Rather, BFP indicated fhat it wbiiUilfmakexS payments to the U.S. Treasury after service of the final

•^B^P providedl ormatiph reiterating its earlier response to this is iilelarations wPI submitted from four contributors who recalled

audit report: ^ ^ • * * ' • issue.

receiving a prBi nptive rec ignation notice from BFP. The response notes that none of these i iyidu is retained a copy of the notice, because, unlike other "cure" letters,1ii t n was required by the contributor unless he or she objected to the redesifnation. In addition, a declaration was submitted from a BFP staff member who worked directly for the now deceased individual responsible for managing BFP's sending and retention of cure letters. His declaration states at the direction of his now deceased supervisor he regularly sent presumptive designation letters to contributors who made primary election contributions in excess of $2,300. The response concluded by asking the Commission to accept its contention that presumptive designation letters were sent.

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Audit Staff's Assessment of Committee Response The response to the preliminary audit report reiterates points made in BFP's response to the exit conference and provides declarations containing the same information that was provided in response to the exit conference. No documentation supporting these declarations or establishing that the actions were timely was included. The Audit staff does not believe the declarations meet the requirements of 11 CFR §110.1(l)(4)(ii) which states that copies of all notices must be retained for presumptive reattributions and/or redesignations to be valid.

Finding 3. Prohibited In-Kind Contributip,ir^\

Waic aircraft that was Summary The review of campaign travel identified one flight bYq^F$ on a reimbursed using the lowest unrestricted and non-disc&tTnted first-clas' ^gmmercial airfare. However, the plane utilized was certifi d^by the Federal Aviati6n>^<iministration and operated in a manner that required its us9;l>i^j|id at a harter rate. Th^^^erence between what BFP paid and the charter rate resul < in th^@£^ipt of an in-^ind contribution of $26,889 from a corporation. In respSf^lS the preliminary audit report recommendation, BFP indicated that' t yould make a pa^m^t to the U.S. Treasury after service of the final audit report.

Legal Standard A. Corporate Contribu^nis Impermissibl^l\ corp^^ion is prohibited from making any contribution in c q ^ ^ i ^ j ^ t h a feder^pection. 24J.S.C. §441b(a).

B. Travel by airplaii^^Camp^n use of an ai|^lane licensed to operate for hire by the Federal Aviation AdmihtsJ |ttj|#i° by the definiti

CFR part 121,129, or 135 are governed :%contrmution at TF#F#§ 100.52(a) and (d). 11 CFR § 100.93(a)(2).

C. Q^i|t[ribution definfemk A gift^^sCcription, loan (except when made in accordance witli 1 i f^fe l §§100.72 a^y)0.73^dvance, or deposit of money or anytiiing of value made by m^person for the||^rpose of influencing any election for Federal office is a contribution. @y term an^^ing of value includes all in-kind contributions.

The usual and norm^yiiiirge for a service is the commercially reasonable rate that one would expect to pay^tfihe time the services were rendered.

The provision of services at a charge less than the usual and normal charge results in an in-kind contribution. The value of such a contribution would be the difference between the usual and normal charge for the services and the amount the political committee was billed and paid. 11 CFR §100.52(a) and (d).

D. Contributions by a Limited Liability Company (LLC). An LLC not electing treatment as corporation under federal tax law or having publicly-traded shares may make contributions to influence federal elections. Such a contribution will be considered as

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having been made from a partnership and govemed by the rules pertaining to partnerships and subject to a single election limit per candidate of $2,300. 11 CFR §110.1(b)(1) and (g)(2) and (4).

Facts and Analysis BFP reimbursed GEH Air Transportation, LLC (GEH) $7,911 for first-class airfare for three people who made a roundtrip flight between New Hampshire and Iowa in June 2007. This roundtrip flight was on a plane which was certified for commercial service by the FAA under 14 CFR part 135 and documentation provided by BFP indicated the flight took place under this part; and thus, it was not eligible for this manner of payment.

Payment for this flight should have been made at a charter r^^hich reflected the usual and normal charges for services. Based on the charter ratepSa ^ time noted on BFP's internal documentation for this trip, BFP should h^paid^$; 800 ($6,000 charter rate per hour x 5.8 hours). By failing to pay a charte^t^ BFP receive^n in-kind conU-ibution of $26,889 (tiie $34,800 owed less thtW,911 paid) from"^^'

The entire amount represents a corporate contribi^^^if ^pB^^lected tax trea^ent as a corporation under Internal Revenue Service rules, l^i^^^er, if GEH elected to be treated for tax purposes as a partnership, or i^Pj^H did not elecl^e^tment as a either a partnership or corporation, the contribi^^^is considered l^^ade by a partnership. The partnership would have made an exces^fFci^^i^tion in tn^p|i6unt of $24,589 ($26,889 - $2,300). \

Although documentati i i ted that theHight was fl^ivvn under 14 CFR part 135, the Audit staff provided^P wit{ opportunity|to obtain additional documentation from GEH indicating thifl^ight not flown uHl eps-H CFR part 135 and therefore not subject to the charter ra^^^he^uke^ ' the exit confeMnci

infonnlfion had not been obtained at the time of 5 ^

rovided information regarding this item to BFP At the Jxit conferenc^the»AudiFsta repreienMi es. The repre tativ ^were requested to provide documentation

;ce demonstrati|| hat BFP dimnot receive a prohibited contribution or make a payment to the U.S. Trell^jj^ The repifsentatives agreed to review the matter and respond accordingly.

On September 26,2Qp, BFP submitted its response. BFP representatives indicated that they agreed with the 'finding and would write a check for $26,889 to the U.S. Treasury.

Preliminary Audit Report Recommendation and Committee Response Although BFP's response to the exit conference indicated that it agreed with the Audit staff analysis, the Audit staff recommended that BFP provide documentation from GEH which showed how GEH elected to be treated under Intemal Revenue Service rules. Also, if GEH was treated as a partnership for tax purposes, information should be provided showing how the contribution should have been attributed to the various

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partners and that only those partners' profits are decreased or losses are increased as a result of the contribution. BFP was also offered the opportunity to produce documentation which:

• demonstrated a lower charter rate; • established a different minimum flight time requirement; and/or, • proved that the plane was not certified for commercial service by

the FAA at the time the flight occuned under 14 CFR parts 121, 129 or 135; and

Absent such a demonstration, the Audit staff recommended th^BFP^ifhake a payment of $26,889 to the U.S. Treasury. In response to the preliminaE^^^report, BFP indicated that it would make a payment to the U.S. Treasury after s | F v i c e ^ ^ final audit report.

I Finding 4. Stale-Dated Checks W

4* Summary '"^^^ The Audit staff identified stale-datedjchecks totaling $^i^757 issued by BFP. Subsequent to the exit conference, BFi|^m^e a paymentl^|^U.S. Treasury for stale-dated checks in the amount of $8,457 rlsit^0> in an unresdl^^Lbialance of $129,300. In response to the preliminary audit report r^comln^^|K)n, BF^povided documentation which resolved $43,400 in stale-dated che%s,jg2m^^^40trunresolved. BFP indicated that it would ma^^^^yment to t^U.S. Tre^^ after service of the final audit report. .^^'^^"''^ \

Legal standard ^kef-=. Handling StaUyQiated C^^|^l^)i£!i%%ks^I^^^ committee has issued checks that the payees Commissibn of its e

1 ^

!^^Mribilii|^Xhave nofcashed, the committee must notify the ^ k | o locat^he payees and encourage them to cash the

outstin3tng checks. Thl^Bpmitte^i^st also submit a check payable to the U. Treasuo%1tthe total amoW of tiiroutstanding checks. 11 CFR §9038.6.

'^p^. wis

Stale-dated Facts and imldysis ^ During our recoi^fatjgnjdf BFP's bank activity, the Audit staff identified 88 checks totaling $13^57 dated between January 1,2007 and April 30,2008.

The Audit staff provided a schedule of the stale-dated checks to BFP representatives at the exit conference. The representatives were requested to either provide evidence that the checks are not outstanding or make a payment to the U.S. Treasury for the amount of the stale-dated checks. They agreed to review the schedule to determine whether they agreed with the list and respond accordingly.

Subsequent to the exit conference, BFP submitted a check for $8,457 to the U.S. Treasury for the stale-dated checks issued during 2007. The remaining stale-dated checks ($129,300), were all refunds of contributions to contributors issued during 2008. BFP

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indicated that when it was able to determine the status of these refunds, a final payment would be made to the U.S. Treasury for the amount of those checks that had not cleared and for which an obligation still exists.

Preliminary Audit Report Recommendation and Committee Response The Audit staff recommended that BFP provide evidence that:

• The checks or a reissued check were not outstanding. Such evidence was to include copies of the front and back of the negotiated checks along with bank statements; or ^

• The outstanding checks had been voided by providing cgpiesbf the voided check with evidence that no obligation existed.

Absent such evidence, the Audit staff recommended ^at I^P m^^payment of $129,300 to the U.S. Treasury. ^

In response to the preliminary audit report, B^B^^os ided documentation i ^ f f i n g that stale-dated checks totaling $48,400 had been resol^^^eiMRi}^ issuance o^a replacement check (which had been negotiated), or ^l^ontributor's authorization to transfer the funds to Citizens for Bide |Lnd/or Unite O^^^es^^. BFP's response also indicated it would make an appropriatSM^ment upon servii|^9,f the final audit report.

Audit s taff 's Assessment of Coii£j^itll^i] | |a[po The Audit staff verified that,;|j ale-dated che'ck^tolalin^ had been resolved as fbllows: .f^P^^Sk ^

$20,700w^^desig^jd by contri%ors to Citizens for Biden; $17,100 was retiiKignatei by contributofsEtb Unite Our States; $5,600 was resolve|||h0if l ^ ^ i i ^ ^ u ^ of a replacement check (which had b e e ^ ^ ^ ^ | d ; and%

was oifputed by^e^Audit staff. These checks were not included in the &le-dated c h e ^ ^ anivigNiHe $129,300.

As a result] $43,400).

re remain unsolved stale-dated checks of $85,900 ($129,300 less

'° Citizens for Biden was the Candidate's Senate campaign committee and Unite Our States was the Candidate's Leadership PAC. " BFP submitted redesignation letters from contributors authorizing these transfers to Citizens for Biden (CFB). However, based upon previous schedules provided by BFP, $11,900 of this amount did not appear to have been included in the actual transfer of fiinds. Therefore, $11,900 is included on the Statement of Net Outstanding Campaign Obligations as an account payable.

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Finding 5. Disclosure of Disbursements

Summary The Audit staff identified 49 disbursements, totaling $3,779,976, that were not adequately disclosed. Problems noted included incorrect or inadequate purpose as well as inconect addresses. Subsequent to the exit conference, BFP filed amended reports that materially conected the disclosure of these disbursements. BFP's response to the preliminary audit report provided no additional comments relevant to this matter.

Legal standard A. Reporting Operating Expenditures. When operating ex^fjimtur^s to the same person exceed $200 in an election cycle, the committee nius^^i^^rt the:

• Amount; • Date when the expenditures were made; • Name and address of the payee; and • Purpose (a brief description of why the x

U.S.C. §434(b)(5)(A) and 11 CFR §104 titbursement was made

B. Examples of Purpose. • Adequate Descriptions. Examffl^s||§adequate descYiplpn^ of "purpose" include

the following: dinner expenses, mediW^ts^ polling,|fravel, party fees, phone banks, travel expenses, travel expose reji^u^^m^ntf catering costs, loan repayment, or CQjnitrJ||j tion refiind. t ^ F R §lC^^)(4)(i)(A). Inadequate Deg^riptibri^The followi|ig descriptions do not meet the requirement for reportir^ || urpose''r^dvance, eleaion^ay expenses, other expenses, expense reimbursemenif^ispellaheQus, outside services, get-out-the-vote, and voter regist| atigi|. 11

FactSigmd Analysra^^. The,tV^^|^staff identifiral adequatS@isclosed. For|i

disbu iplments, totaling $3,779,976, tiiat were not )roximately half of these disbursements to its media vendor.

the purpose ^;|Jnconect (^inadequately disclosed. For the remaining disbursements to its credit card %^or, the spdress of the credit card vendor was inconectly disclosed. When questionedl^^J^ representatives responded that the person who had been primarily responsible for data had been dismissed for poor data entry and reporting.

At the exit conference, BFP representatives were provided a schedule detailing these items. The representatives were requested to file amended Schedules B to conect the disclosure of these transactions. They agreed to comply with the recommendation.

Subsequent to the exit conference, BFP filed amended reports that materially conected the disclosure of the disbursements noted above.

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Preliminary Audit Report Recommendation and Committee Response The Audit staff recommended that BFP provide any additional comments it felt were relevant to this matter. BFP provided no additional comments.

I Finding 6. Reporting of Debts and Obligations

Summary The Audit staff identified debt totaling $870,296 that was not disdb^ed on Schedules D (Debts and Obligations) as required. Subsequent to the exit comerenc , BFP filed amended reports that materially conected the disclosure oftpsei^debts. BFP's response to the preliminary audit report provided no additional comfnentP^leyant to this matter.

•«3 Legal Standard # A. Continuous Reporting Required. A polit^fconimi^ee must disclb|)^he mount and nature of outstanding debts and obligations i%^those J.ebts are extingu|§h^ed. 2 U.S.C. §434(b)(8) and 11 CFR §§104.3(d) and l(S#(aW^=^

B. Separate Schedules. A political %©mmittee must fii^|^Darate schedules for debts owed by the committee and debts owel^^^e,.committee, t^i^^;,with a statement explaining the circumstances and conditi^h^s^iSmj^^hich eacl^ebt and obligation was incuned or extinguished. 11 CFR §104.1'l(a). ^^^^^i^.^^^"^'

. ^Sj i aitions. ^ C. Itemizing Debts and^S'l^^^tipns. • A debt of less rh^t be reportei once it has been outstanding 60 days from

the date in urre;dii!(|he (l^j^f^ the transaction); the committee reports it on the next regularly s c h e d i ^ ^ ^ ^ ^ ^ _ ^ # A ddbtf^Ming $50teust bi^diHliied in the report that covers the date on

tiieci^^ in§%d. 11 CFR §104.11(b).

F a ^ t s % | L A n a l y s i ^ ^ ^ The Audit^^ff identified dE ts totaling $870,296 that were not disclosed on Schedules D. These deb^^^gnsisted opiine transactions to two vendors, all of which were more than $500. The%|%s wer^^pically incuned during the middle of the month and paid in full the subsequent i^|ith. However, BFP did not disclose them as debts in the report covering the date on^hich the debt was incuned.

At the exit conference, BFP representatives were provided a schedule detailing these items. The representatives were requested to amend the reports to correct the disclosure of these transactions. They agreed to comply with the recommendation.

Subsequent to the exit conference, BFP filed amended reports that materially conected the disclosure of the debts noted above.

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Preliminary Audit Report Recommendation and Committee Response The Audit staff recommended that BFP provide any additional comments it felt were relevant to this matter. BFP provided no additional comments.